Woolies shows ALH hand

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Woolworths chief Roger Corbett and Melbourne hotelier Bruce Mathieson are poised to launch a $1 billion takeover bid for Australian Leisure & Hospitality after grabbing a 16 per cent stake in the nation's largest pubs concern.

In a move expected to strengthen Woolworths' grip on Australia's $11 billion retail liquor market, Bruandwo, a joint venture between the retailer and Mr Mathieson, announced yesterday that it had built up a 56.5 million share holding in ALH since the start of June.

Mr Corbett and Mr Mathieson contacted ALH chief Geoff Rankin yesterday to discuss "alternatives that may benefit both parties", including a takeover and carve-up of ALH, which joined the ranks of the Australian Stock Exchange less than a year ago.

While Bruandwo said "no decision will be made in relation to any alternatives prior to discussion with ALH", the market is betting a bid is most likely.

ALH shares closed 23¢ higher at $2.98, on top of the 27¢ gain it made on Thursday when investment bank UBS snapped up more than 10 per cent of the company in a sharemarket raid.

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Sources close to the deal said Woolworths was unlikely to be a passive shareholder, prompting talk that the retailer would take ALH's 263 retail liquor outlets, of which 154 are located on pub premises. Under the proposal, Mr Mathiesonwould take the gaming, pub and bar operations.

ALH owns 132 pubs and 6000 poker machines in five states, and is particularly attractive to Mr Corbett because of its 52 pubs in Queensland, where off-site liquor licences are only given to pub owners.

ALH, which was spun off by Foster's Group last November at $2.50 a share, has been buying pubs in Queensland, where the pub market has been a hive of activity recently.

MGW Hotels, another joint venture between Mr Mathieson and Woolworths, has paid an estimated $350 million for more than 30 pubs and 55 bottle shops in Queensland since 2001.

"A major attraction for Woolworths might be in gaining access to the land bank of ALH," Macquarie Bank said yesterday. "In particular, this would facilitate further roll-out of Dan Murphy's liquor stores in Queensland and Victoria."

Bruandwo said it had been acquiring ALH shares since June 3 at an average price of about $2.62.

Interestingly Goldman Sachs JBWere, which has been employed to advise ALH, was a seller, offloading 6 million shares to Woolworths at an average price of $2.28 a share.

Bruandwo is expected to canvass ALH's institutional shareholders next week.

Andrew King, a portfolio manager at Investors Mutual, which owns 5.4 per cent of ALH, hinted that the ALH share price had not yet reached attractive levels. "We believe ALH is starting to approach its true value," he said.